Constantino v. Asia Life, 87 Phil.

248
 Non-payment of Premiums of Life Insurance Policy
 New York Rule

G.R. No. L-1669             August 31, 1950

PAZ LOPEZ DE CONSTANTINO, plaintiff-appellant,
vs.
ASIA LIFE INSURANCE COMPANY, defendant-appellee.
x---------------------------------------------------------x
G.R. No. L-1670             August 31, 1950
AGUSTINA PERALTA, plaintiff-appellant,
vs.
ASIA LIFE INSURANCE COMPANY, defendant-appellee.

BENGZON, J.

FACTS: These consolidated cases involve 2 life insurance policies that were availed of before the
Pacific War. The beneficiaries seek to recover the amount thereof although the insured died after
repeatedly failing to pay the stipulated premiums, such failure having been caused by the last war
in the Pacific.

As to the first case, in consideration of the sum of P176.04 as annual premium duly paid to it, the
Asia Life Insurance Company (a foreign corporation incorporated under the laws of Delaware,
U.S.A.), issued on September 27, 1941, its Policy No. 93912 for P3,000, whereby it insured the life of
Arcadio Constantino for a term of twenty years. The first premium covered the period up to
September 26, 1942. The plaintiff Paz Lopez de Constantino was regularly appointed
beneficiary. After that first payment, no further premiums were paid. The insured died on
September 22, 1944.

As to the second case, on August 1, 1938, the defendant Asia Life Insurance Company issued its
Policy No. 78145 (Joint Life 20-Year Endowment Participating with Accident Indemnity), covering
the lives of the spouses Tomas Ruiz and Agustina Peralta, for the sum of P3,000. The annual
premium stipulated in the policy was regularly paid from August 1, 1938, up to and including
September 30, 1941. Effective August 1, 1941, the mode of payment of premiums was changed from
annual to quarterly, so that quarterly premiums were paid, the last having been delivered on
November 18, 1941, said payment covering the period up to January 31, 1942. No further payments
were handed to the insurer. Upon the Japanese occupation, the insured and the insurer became
separated by the lines of war, and it was impossible and illegal for them to deal with each other.
Because the insured had borrowed on the policy an amount of P234.00 in January, 1941, the cash
surrender value of the policy was sufficient to maintain the policy in force only up to September 7,
1942. Tomas Ruiz died on February 16, 1945. The plaintiff Agustina Peralta is his beneficiary. Her
demand for payment met with defendant's refusal, grounded on non-payment of the premiums.

Both insurance policy provided that “non-payment shall cause [the] policy to lapse.”
The defendant, being an American corporation, had to close its branch office in Manila by reason
of the Japanese occupation, i.e. from January 2, 1942, until the year 1945.

Plaintiffs maintain that, as beneficiaries, they are entitled to receive the proceeds of the policies
minus all sums due for premiums in arrears. They allege that non-payment of the premiums was
caused by the closing of defendant's offices in Manila during the Japanese occupation and the
impossible circumstances created by war. Defendant on the other hand asserts that the policies
had lapsed for non-payment of premiums, in accordance with the contract of the parties and the
law applicable to the situation. The lower court absolved the defendant. 

ISSUE/S: Whether the beneficiary is entitled to the claim despite the non-payment of premiums
by the insured. (NO)

RULING: After perusing the Insurance Act, we are firmly persuaded that the non-payment of
premiums is such a vital defense of insurance companies that since the very beginning, said Act
no. 2427 expressly preserved it, by providing that after the policy shall have been in force for two
years, it shall become incontestable (i.e. the insurer shall have no defense) except for fraud,  non-
payment of premiums, and military or naval service in time of war (sec. 184 [b], Insurance Act).
And when Congress recently amended this section (Rep. Act No. 171), the defense of fraud was
eliminated, while the defense of nonpayment of premiums was preserved. Thus the fundamental
character of the undertaking to pay premiums and the high importance of the defense of non-
payment thereof, was specifically recognized.

In keeping with such legislative policy, we feel no hesitation to adopt the United States Rule,
which is in effect a variation of the Connecticut rule for the sake of equity. In this connection, it
appears that the first policy had no reserve value, and that the equitable values of the second had
been practically returned to the insured in the form of loan and advance for premium.

ADDITIONAL INFORMATION: The controversial point has never been decided in this
jurisdiction. Fortunately, this court has had the benefit of extensive and exhaustive memoranda
including those of amici curiae. The matter has received careful consideration, inasmuch as it
affects the interest of thousands of policy-holders and the obligations of many insurance
companies operating in this country.

Since the year 1917, the Philippine law on Insurance was found in Act No. 2427, as amended, and
the Civil Code.2 Act No. 2427 was largely copied from the Civil Code of California. 3 And this court
has heretofore announced its intention to supplement the statutory laws with general principles
prevailing on the subject in the United State.

In Young  vs.  Midland Textile Insurance Co. (30 Phil., 617), we said that "contracts of insurance are
contracts of indemnity upon the terms and conditions specified in the policy. The parties have a
right to impose such reasonable conditions at the time of the making of the contract as they may
deem wise and necessary. The rate of premium is measured by the character of the risk assumed.
The insurance company, for a comparatively small consideration, undertakes to guarantee the
insured against loss or damage, upon the terms and conditions agreed upon, and upon no other,
and when called upon to pay, in case of loss, the insurer, therefore, may justly insists upon a
fulfillment of these terms. If the insured cannot bring himself within the conditions of the policy,
he is not entitled for the loss. The terms of the policy constitute the measure of the insurer's
liability, and in order to recover the insured must show himself within those terms; and if it
appears that the contract has been terminated by a violation, on the part of the insured, of its
conditions, then there can be no right of recovery. The compliance of the insured with the terms
of the contract is a condition precedent to the right of recovery."

Recall of the above pronouncements is appropriate because the policies in question stipulate that
"all premium payments are due in advance and any unpunctuality in making any such payment
shall cause this policy to lapse." Wherefore, it would seem that pursuant to the express terms of
the policy, non-payment of premium produces its avoidance.

The conditions of contracts of Insurance, when plainly expressed in a policy, are binding upon the
parties and should be enforced by the courts, if the evidence brings the case clearly within their
meaning and intent. It tends to bring the law itself into disrepute when, by astute and subtle
distinctions, a plain case is attempted to be taken without the operation of a clear, reasonable and
material obligation of the contract. Mack vs. Rochester German Ins. Co., 106 N.Y., 560, 564.
(Young  vs. Midland Textile Ins. Co., 30 Phil., 617, 622.)

In Glaraga  vs. Sun Life Ass. Co. (49 Phil., 737), this court held that a life policy was avoided
because the premium had not been paid within the time fixed, since by its express terms, non-
payment of any premium when due or within the thirty-day period of grace, ipso facto caused the
policy to lapse. This goes to show that although we take the view that insurance policies should
be conserved5 and should not lightly be thrown out, still we do not hesitate to enforce the
agreement of the parties.

Forfeitures of insurance policies are not favored, but courts cannot for that reason alone refuse to
enforce an insurance contract according to its meaning. (45 C.J.S., p. 150.)

Nevertheless, it is contended for plaintiff that inasmuch as the non-payment of premium was the
consequence of war, it should be excused and should not cause the forfeiture of the policy.

Professor Vance of Yale, in his standard treatise on Insurance, says that in determining the effect
of non-payment of premiums occasioned by war, the American cases may be divided into three
groups, according as they support the so-called Connecticut Rule, the New York Rule, or the
United States Rule.

The first holds the view that "there are two elements in the consideration for which the annual
premium is paid — First, the mere protection for the year, and second, the privilege of renewing
the contract for each succeeding year by paying the premium for that year at the time agreed
upon. According to this view of the contract, the payment of premiums is a condition precedent,
the non-performance would be illegal necessarily defeats the right to renew the contract."

The second rule, apparently followed by the greater number of decisions, hold that "war between
states in which the parties reside merely suspends the contracts of the life insurance, and that,
upon tender of all premiums due by the insured or his representatives after the war has
terminated, the contract revives and becomes fully operative."

The United States rule declares that the contract is not merely suspended, but is abrogated by
reason of non-payments is peculiarly of the essence of the contract. It additionally holds that it
would be unjust to allow the insurer to retain the reserve value of the policy, which is the excess
of the premiums paid over the actual risk carried during the years when the policy had been in
force. This rule was announced in the well-known Statham 6 case which, in the opinion of
Professor Vance,  is the correct rule.

The appellants and some amici curiae contend that the New York rule should be applied here. The
appellee and other amici curiae contend that the United States doctrine is the orthodox view.

We have read and re-read the principal cases upholding the different theories. Besides the respect
and high regard we have always entertained for decisions of the Supreme Court of the United
States, we cannot resist the conviction that the reasons expounded in its decision of the Statham
case are logically and judicially sound. Like the instant case, the policy involved in the Statham
decision specifies that non-payment on time shall cause the policy to cease and determine.
Reasoning out that punctual payments were essential, the court said:

. . . it must be conceded that promptness of payment is essential in the business of life insurance.
All the calculations of the insurance company are based on the hypothesis of prompt payments.
They not only calculate on the receipt of the premiums when due, but on compounding interest
upon them. It is on this basis that they are enabled to offer assurance at the favorable rates they
do. Forfeiture for non-payment is a necessary means of protecting themselves from
embarrassment. Unless it were enforceable, the business would be thrown into confusion. It is
like the forfeiture of shares in mining enterprises, and all other hazardous undertakings. There
must be power to cut-off unprofitable members, or the success of the whole scheme is
endangered. The insured parties are associates in a great scheme. This associated relation exists
whether the company be a mutual one or not. Each is interested in the engagements of all; for out
of the co-existence of many risks arises the law of average, which underlies the whole business. An
essential feature of this scheme is the mathematical calculations referred to, on which the
premiums and amounts assured are based. And these calculations, again, are based on the
assumption of average mortality, and of prompt payments and compound interest thereon.
Delinquency cannot be tolerated nor redeemed, except at the option of the company. This has
always been the understanding and the practice in this department of business. Some companies,
it is true, accord a grace of thirty days, or other fixed period, within which the premium in arrear
may be paid, on certain conditions of continued good health, etc. But this is a matter of
stipulation, or of discretion, on the part of the particular company. When no stipulation exists, it
is the general understanding that time is material, and that the forfeiture is absolute if the
premium be not paid. The extraordinary and even desperate efforts sometimes made, when an
insured person is in extremes to meet a premium coming due, demonstrates the common view of
this matter.

The case, therefore, is one in which time is material and of the essence and of the essence of the
contract. Non-payment at the day involves absolute forfeiture if such be the terms of the contract,
as is the case here. Courts cannot with safety vary the stipulation of the parties by introducing
equities for the relief of the insured against their own negligence.

In another part of the decision, the United States Supreme Court considers and rejects what is, in
effect, the New York theory in the following words and phrases:
The truth is, that the doctrine of the revival of contracts suspended during the war is one based
on considerations of equity and justice, and cannot be invoked to revive a contract which it would
be unjust or inequitable to revive.

In the case of Life insurance, besides the materiality of time in the performance of the contract,
another strong reason exists why the policy should not be revived. The parties do not stand on
equal ground in reference to such a revival. It would operate most unjustly against the company.
The business of insurance is founded on the law of average; that of life insurance eminently so.
The average rate of mortality is the basis on which it rests. By spreading their risks over a large
number of cases, the companies calculate on this average with reasonable certainty and safety.
Anything that interferes with it deranges the security of the business. If every policy lapsed by
reason of the war should be revived, and all the back premiums should be paid, the companies
would have the benefit of this average amount of risk. But the good risks are never heard from;
only the bar are sought to be revived, where the person insured is either dead or dying. Those in
health can get the new policies cheaper than to pay arrearages on the old. To enforce a revival of
the bad cases, whilst the company necessarily lose the cases which are desirable, would be
manifestly unjust. An insured person, as before stated, does not stand isolated and alone. His case
is connected with and co-related to the cases of all others insured by the same company. The
nature of the business, as a whole, must be looked at to understand the general equities of the
parties.

The above consideration certainly lend themselves to the approval of fair-minded men. Moreover,
if, as alleged, the consequences of war should not prejudice the insured, neither should they bear
down on the insurer.

Urging adoption of the New York theory, counsel for plaintiff point out that the obligation of the
insured to pay premiums was excused during the war owing to impossibility of performance, and
that consequently no unfavorable consequences should follow from such failure.

The appellee answers, quite plausibly, that the periodic payment of premiums, at least those after
the first, is not an obligation of the insured, so much so that it is not a debt enforceable by action
of the insurer.
Under an Oklahoma decision, the annual premium due is not a debt. It is not an obligation upon
which the insurer can maintain an action against insured; nor is its settlement governed by the
strict rule controlling payments of debts. So, the court in a Kentucky case declares, in the opinion,
that it is not a debt. . . . The fact that it is payable annually or semi-annually, or at any other
stipulated time, does not of itself constitute a promise to pay, either express or implied. In case of
non-payment the policy is forfeited, except so far as the forfeiture may be saved by agreement, by
waiver, estoppel, or by statute. The payment of the premium is entirely optional, while a debt may
be enforced at law, and the fact that the premium is agreed to be paid is without force, in the
absence of an unqualified and absolute agreement to pay a specified sum at some certain time. In
the ordinary policy there is no promise to pay, but it is optional with the insured whether he will
continue the policy or forfeit it. (3 Couch, Cyc. on Insurance, Sec. 623, p. 1996.)

It is well settled that a contract of insurance is sui generis. While the insured by an observance of
the conditions may hold the insurer to his contract, the latter has not the power or right to
compel the insured to maintain the contract relation with it longer than he chooses. Whether the
insured will continue it or not is optional with him. There being no obligation to pay for the
premium, they did not constitute a debt. (Noble  vs.  Southern States M.D. Ins. Co., 157 Ky., 46; 162
S.W., 528.)

It should be noted that the parties contracted not only for peacetime conditions but also for times
of war, because the policies contained provisions applicable expressly to wartime days. The logical
inference, therefore, is that the parties contemplated uninterrupted operation of the contract
even if armed conflict should ensue.

For the plaintiffs, it is again argued that in view of the enormous growth of insurance business
since the Statham decision, it could now be relaxed and even disregarded. It is stated "that the
relaxation of rules relating to insurance is in direct proportion to the growth of the business. If
there were only 100 men, for example, insured by a Company or a mutual Association, the death
of one will distribute the insurance proceeds among the remaining 99 policy-holders. Because the
loss which each survivor will bear will be relatively great, death from certain agreed or specified
causes may be deemed not a compensable loss. But if the policy-holders of the Company or
Association should be 1,000,000 individuals, it is clear that the death of one of them will not
seriously prejudice each one of the 999,999 surviving insured. The loss to be borne by each
individual will be relatively small."

The answer to this is that as there are (in the example) one million policy-holders, the "losses" to
be considered will not be the death of one  but the death of ten thousand, since the proportion of 1
to 100 should be maintained. And certainly such losses for 10,000 deaths will not be "relatively
small."
Insular Life v. Ebrado, 80 SCRA 181
 Application of Art. 739, 2012 NCC
 Liberality
 Common-law spouse not entitled to insurance policy as beneficiary if
concubinage/adultery (illicit relations) exist

G.R. No. L-44059 October 28, 1977

THE INSULAR LIFE ASSURANCE COMPANY, LTD., plaintiff-appellee,
vs.
CARPONIA T. EBRADO and PASCUALA VDA. DE EBRADO, defendants-appellants.

MARTIN, J.

FACTS: On September 1, 1968, Buenaventura Cristor Ebrado was issued by The Life Assurance Co.,
Ltd., Policy No. 009929 on a whole-life for P5,882.00 with a, rider for Accidental Death for the
same amount Buenaventura C. Ebrado designated Carponia T. Ebrado as the revocable beneficiary
in his policy. He to her as his wife. On October 21, 1969, Buenaventura C. Ebrado died as a result
of an accidentt when he was hit by a failing branch of a tree. As the policy was in force, The
Insular Life Assurance Co., Ltd. liable to pay the coverage in the total amount of P11,745.73,
representing the face value of the policy in the amount of P5,882.00 plus the additional benefits
for accidental death also in the amount of P5,882.00 and the refund of P18.00 paid for the
premium due November, 1969, minus the unpaid premiums and interest thereon due for January
and February, 1969, in the sum of P36.27.

Carponia T. Ebrado filed with the insurer a claim for the proceeds of the Policy as the designated
beneficiary therein, although she admits that she and the insured Buenaventura C. Ebrado were
merely living as husband and wife without the benefit of marriage. Pascuala Vda. de Ebrado also
filed her claim as the widow of the deceased insured. She asserts that she is the one entitled to the
insurance proceeds, not the common-law wife, Carponia T. Ebrado. In doubt as to whom the
insurance proceeds shall be paid, the insurer, The Insular Life Assurance Co., Ltd. commenced an
action for Interpleader before the Court of First Instance of Rizal on April 29, 1970.

On September 25, 1972, the trial court rendered judgment declaring among others, Carponia T.
Ebrado disqualified from becoming beneficiary of the insured Buenaventura Cristor Ebrado and
directing the payment of the insurance proceeds to the estate of the deceased insured. 

ISSUE/S: Whether a common-law wife named as beneficiary in the life insurance policy of a
legally married man claim the proceeds thereof in case of death of the latter. (NO)

RULING: The ruling of the lower court was affirmed. Carponia T. Ebrado was declared
disqualified to be the beneficiary of the late Buenaventura C. Ebrado in his life insurance policy.
As a consequence, the proceeds of the policy are held payable to the estate of the deceased
insured. 
 It is quite unfortunate that the Insurance Act (RA 2327, as amended) or even the new Insurance
Code (PD No. 612, as amended) does not contain any specific provision grossly resolutory of the
prime question at hand. Section 50 of the Insurance Act which provides that "(t)he insurance shall
be applied exclusively to the proper interest of the person in whose name it is made" 1 cannot be
validly seized upon to hold that it includes the beneficiary. The word "interest" highly suggests
that the provision refers only to the "insured" and not to the beneficiary, since a contract of
insurance is personal in character. 2 Otherwise, the prohibitory laws against illicit relationships
especially on property and descent will be rendered nugatory, as the same could easily be
circumvented by modes of insurance. Rather, the general rules of civil law should be applied to
resolve this void in the Insurance Law. Article 2011 of the New Civil Code states: "The contract of
insurance is governed by special laws. Matters not expressly provided for in such special laws shall
be regulated by this Code." When not otherwise specifically provided for by the Insurance Law, the
contract of life insurance is governed by the general rules of the civil law regulating
contracts. 3 And under Article 2012 of the same Code, "any person who is forbidden from receiving
any donation under Article 739 cannot be named beneficiary of a life insurance policy by the
person who cannot make a donation to him. 4 Common-law spouses are, definitely, barred from
receiving donations from each other. Article 739 of the new Civil Code provides: 

The following donations shall be void:

1. Those made between persons who were guilty of adultery or concubinage at the time of donation;
Those made between persons found guilty of the same criminal offense, in consideration thereof;
3. Those made to a public officer or his wife, descendants or ascendants by reason of his office.

In the case referred to in No. 1, the action for declaration of nullity may be brought by the spouse
of the donor or donee; and the guilt of the donee may be proved by preponderance of evidence in the
same action.

ADDITIONAL INFORMATION:
1. It is quite unfortunate that the Insurance Act (RA 2327, as amended) or even the new Insurance
Code (PD No. 612, as amended) does not contain any specific provision grossly resolutory of the
prime question at hand. Section 50 of the Insurance Act which provides that "(t)he insurance shag
be applied exclusively to the proper interest of the person in whose name it is made" 1 cannot be
validly seized upon to hold that the mm includes the beneficiary. The word "interest" highly
suggests that the provision refers only to the "insured" and not to the beneficiary, since a contract
of insurance is personal in character. 2 Otherwise, the prohibitory laws against illicit relationships
especially on property and descent will be rendered nugatory, as the same could easily be
circumvented by modes of insurance. Rather, the general rules of civil law should be applied to
resolve this void in the Insurance Law. Article 2011 of the New Civil Code states: "The contract of
insurance is governed by special laws. Matters not expressly provided for in such special laws shall
be regulated by this Code." When not otherwise specifically provided for by the Insurance Law, the
contract of life insurance is governed by the general rules of the civil law regulating
contracts. 3 And under Article 2012 of the same Code, "any person who is forbidden from receiving
any donation under Article 739 cannot be named beneficiary of a fife insurance policy by the
person who cannot make a donation to him. 4 Common-law spouses are, definitely, barred from
receiving donations from each other. Article 739 of the new Civil Code provides:

The following donations shall be void:

1. Those made between persons who were guilty of adultery or concubinage at the time of donation;
2. Those made between persons found guilty of the same criminal offense, in consideration
thereof;
3. Those made to a public officer or his wife, descendants or ascendants by reason of his office.

In the case referred to in No. 1, the action for declaration of nullity may be brought by the spouse
of the donor or donee; and the guilt of the donee may be proved by preponderance of evidence in the
same action.

2. In essence, a life insurance policy is no different from a civil donation insofar as the beneficiary
is concerned. Both are founded upon the same consideration: liberality. A beneficiary is like a
donee, because from the premiums of the policy which the insured pays out of liberality, the
beneficiary will receive the proceeds or profits of said insurance. As a consequence, the
proscription in Article 739 of the new Civil Code should equally operate in life insurance
contracts. The mandate of Article 2012 cannot be laid aside: any person who cannot receive a
donation cannot be named as beneficiary in the life insurance policy of the person who cannot
make the donation. 5 Under American law, a policy of life insurance is considered as a testament
and in construing it, the courts will, so far as possible treat it as a will and determine the effect of
a clause designating the beneficiary by rules under which wins are interpreted.

3. Policy considerations and dictates of morality rightly justify the institution of a barrier between
common law spouses in record to Property relations since such hip ultimately encroaches upon
the nuptial and filial rights of the legitimate family There is every reason to hold that the bar in
donations between legitimate spouses and those between illegitimate ones should be enforced in
life insurance policies since the same are based on similar consideration As above pointed out, a
beneficiary in a life insurance policy is no different from a donee. Both are recipients of pure
beneficence. So long as marriage remains the threshold of family laws, reason and morality dictate
that the impediments imposed upon married couple should likewise be imposed upon extra-
marital relationship. If legitimate relationship is circumscribed by these legal disabilities, with
more reason should an illicit relationship be restricted by these disabilities. Thus, in Matabuena v.
Cervantes, 7 this Court, through Justice Fernando, said:

If the policy of the law is, in the language of the opinion of the then Justice J.B.L. Reyes of that
court (Court of Appeals), 'to prohibit donations in favor of the other consort and his descendants
because of an undue and improper pressure and influence upon the donor, a prejudice deeply
rooted in our ancient law;" por-que no se enganen desponjandose el uno al otro por amor que han
de consuno' (According to) the Partidas (Part IV, Tit. XI, LAW IV), reiterating the rationale 'No
Mutuato amore invicem spoliarentur' the Pandects (Bk, 24, Titl. 1, De donat, inter virum et
uxorem); then there is very reason to apply the same prohibitive policy to persons living together
as husband and wife without the benefit of nuptials. For it is not to be doubted that assent to such
irregular connection for thirty years bespeaks greater influence of one party over the other, so
that the danger that the law seeks to avoid is correspondingly increased. Moreover, as already
pointed out by Ulpian (in his lib. 32 ad Sabinum, fr. 1), 'it would not be just that such donations
should subsist, lest the condition 6f those who incurred guilt should turn out to be better.' So
long as marriage remains the cornerstone of our family law, reason and morality alike demand
that the disabilities attached to marriage should likewise attach to concubinage.

It is hardly necessary to add that even in the absence of the above pronouncement, any other
conclusion cannot stand the test of scrutiny. It would be to indict the frame of the Civil Code for a
failure to apply a laudable rule to a situation which in its essentials cannot be distinguished.
Moreover, if it is at all to be differentiated the policy of the law which embodies a deeply rooted
notion of what is just and what is right would be nullified if such irregular relationship instead of
being visited with disabilities would be attended with benefits. Certainly a legal norm should not
be susceptible to such a reproach. If there is every any occasion where the principle of statutory
construction that what is within the spirit of the law is as much a part of it as what is written, this
is it. Otherwise the basic purpose discernible in such codal provision would not be attained.
Whatever omission may be apparent in an interpretation purely literal of the language used must
be remedied by an adherence to its avowed objective.

4. We do not think that a conviction for adultery or concubinage is exacted before the disabilities
mentioned in Article 739 may effectuate. More specifically, with record to the disability on
"persons who were guilty of adultery or concubinage at the time of the donation," Article 739 itself
provides:

In the case referred to in No. 1, the action for declaration of nullity may be brought by the spouse
of the donor or donee; and the guilty of the donee may be proved by preponderance of evidence in
the same action.

The underscored clause neatly conveys that no criminal conviction for the offense is a condition
precedent. In fact, it cannot even be from the aforequoted provision that a prosecution is needed.
On the contrary, the law plainly states that the guilt of the party may be proved "in the same
acting for declaration of nullity of donation. And, it would be sufficient if evidence preponderates
upon the guilt of the consort for the offense indicated. The quantum of proof in criminal cases is
not demanded.

In the instant case, the requisite proof of common-law relationship between the insured and the
beneficiary has been conveniently supplied by the stipulations between the parties in the pre-trial
conference of the case. It case agreed upon and stipulated therein that the deceased insured
Buenaventura C. Ebrado was married to Pascuala Ebrado with whom she has six legitimate
children; that during his lifetime, the deceased insured was living with his common-law wife,
Carponia Ebrado, with whom he has two children. These stipulations are nothing less
than judicial admissions  which, as a consequence, no longer require proof and cannot be
contradicted. 8 A fortiori, on the basis of these admissions, a judgment may be validly rendered
without going through the rigors of a trial for the sole purpose of proving the illicit liaison
between the insured and the beneficiary. In fact, in that pretrial, the parties even agreed "that a
decision be rendered based on this agreement and stipulation of facts as to who among the two
claimants is entitled to the policy."
White Gold Marine Services vs. Pioneer Insurance, et al. (GR No. 154514, 28 July 2005)
 What constitutes doing an insurance business
 Insurance Contract
 Marine Insurance
 Mutual Insurance Company
 P&I Club
 Test to determine if a contract is an insurance contract

G.R. No. 154514. July 28, 2005

WHITE GOLD MARINE SERVICES, INC., Petitioners, vs. PIONEER INSURANCE AND
SURETY CORPORATION AND THE STEAMSHIP MUTUAL UNDERWRITING
ASSOCIATION (BERMUDA) LTD., Respondents.

QUISUMBING, J.

FACTS: White Gold Marine Services, Inc. (White Gold) procured a protection and indemnity
coverage for its vessels from The Steamship Mutual Underwriting Association (Bermuda) Limited
(Steamship Mutual) through Pioneer Insurance and Surety Corporation (Pioneer). Subsequently,
White Gold was issued a Certificate of Entry and Acceptance. 3 Pioneer also issued receipts
evidencing payments for the coverage. When White Gold failed to fully pay its accounts,
Steamship Mutual refused to renew the coverage.

Steamship Mutual thereafter filed a case against White Gold for collection of sum of money to
recover the latter’s unpaid balance. White Gold on the other hand, filed a complaint before the
Insurance Commission claiming that Steamship Mutual violated Sections 186 4 and 1875 of the
Insurance Code, while Pioneer violated Sections 299,6 3007 and 3018 in relation to Sections 302 and
303, thereof.

The Insurance Commission dismissed the complaint. It said that there was no need for Steamship
Mutual to secure a license because it was not engaged in the insurance business. It explained that
Steamship Mutual was a Protection and Indemnity Club (P & I Club). Likewise, Pioneer need not
obtain another license as insurance agent and/or a broker for Steamship Mutual because
Steamship Mutual was not engaged in the insurance business. Moreover, Pioneer was already
licensed, hence, a separate license solely as agent/broker of Steamship Mutual was already
superfluous.

The parties admit that Steamship Mutual is a P & I Club. Steamship Mutual admits it does not
have a license to do business in the Philippines although Pioneer is its resident agent. This
relationship is reflected in the certifications issued by the Insurance Commission.

Hence, this petition for review assailing the Decision1 dated July 30, 2002 of the Court of Appeals
in CA-G.R. SP No. 60144, affirming the Decision2 dated May 3, 2000 of the Insurance Commission
in I.C. Adm. Case No. RD-277. Both decisions held that there was no violation of the Insurance
Code and the respondents do not need license as insurer and insurance agent/broker.
Petitioner insists that Steamship Mutual as a P & I Club is engaged in the insurance business. To
buttress its assertion, it cites the definition of a P & I Club in Hyopsung Maritime Co., Ltd. v. Court
of Appeals10  as "an association composed of shipowners in general who band together for the
specific purpose of providing insurance cover on a mutual basis against liabilities incidental to
shipowning that the members incur in favor of third parties." It stresses that as a P & I Club,
Steamship Mutual’s primary purpose is to solicit and provide protection and indemnity coverage
and for this purpose, it has engaged the services of Pioneer to act as its agent. Respondents
contend that although Steamship Mutual is a P & I Club, it is not engaged in the insurance
business in the Philippines. It is merely an association of vessel owners who have come together
to provide mutual protection against liabilities incidental to shipowning.11 Respondents
aver Hyopsung  is inapplicable in this case because the issue in Hyopsung was the jurisdiction of
the court over Hyopsung.

ISSUE/S:
(1) Whether Steamship Mutual, a P & I Club, engaged in the insurance business in the Philippines.
(YES)
(2) Whether Pioneer needs a license as an insurance agent/broker for Steamship Mutual. (YES)

RULING:
(1) Section 2(2) of the Insurance Code enumerates what constitutes "doing an insurance business"
or "transacting an insurance business". These are:
(a) making or proposing to make, as insurer, any insurance contract;
(b) making, or proposing to make, as surety, any contract of suretyship as a vocation and not as
merely incidental to any other legitimate business or activity of the surety;
(c) doing any kind of business, including a reinsurance business, specifically recognized as
constituting the doing of an insurance business within the meaning of this Code;
(d) doing or proposing to do any business in substance equivalent to any of the foregoing in a
manner designed to evade the provisions of this Code.
...
The same provision also provides, the fact that no profit is derived from the making of insurance
contracts, agreements or transactions, or that no separate or direct consideration is received
therefor, shall not preclude the existence of an insurance business.12

The test to determine if a contract is an insurance contract or not, depends on the nature of the
promise, the act required to be performed, and the exact nature of the agreement in the light of
the occurrence, contingency, or circumstances under which the performance becomes requisite.
It is not by what it is called.13

Basically, an insurance contract is a contract of indemnity. In it, one undertakes for a

consideration to indemnify another against loss, damage or liability arising from an unknown or
contingent event.14
In particular, a marine insurance undertakes to indemnify the assured against marine losses, such
as the losses incident to a marine adventure.15 Section 9916 of the Insurance Code enumerates the
coverage of marine insurance.

Relatedly, a mutual insurance company is a cooperative enterprise where the members are both
the insurer and insured. In it, the members all contribute, by a system of premiums or
assessments, to the creation of a fund from which all losses and liabilities are paid, and where the
profits are divided among themselves, in proportion to their interest. 17 Additionally, mutual
insurance associations, or clubs, provide three types of coverage, namely, protection and
indemnity, war risks, and defense costs.18

A P & I Club is "a form of insurance against third party liability, where the third party is anyone
other than the P & I Club and the members." 19 By definition then, Steamship Mutual as a P & I
Club is a mutual insurance association engaged in the marine insurance business.

The records reveal Steamship Mutual is doing business in the country albeit without the requisite
certificate of authority mandated by Section 187 20 of the Insurance Code. It maintains a resident
agent in the Philippines to solicit insurance and to collect payments in its behalf. We note that
Steamship Mutual even renewed its P & I Club cover until it was cancelled due to non-payment of
the calls. Thus, to continue doing business here, Steamship Mutual or through its agent Pioneer,
must secure a license from the Insurance Commission.

Since a contract of insurance involves public interest, regulation by the State is necessary. Thus,
no insurer or insurance company is allowed to engage in the insurance business without a license
or a certificate of authority from the Insurance Commission.21

(2) Pioneer is the resident agent of Steamship Mutual as evidenced by the certificate of
registration22 issued by the Insurance Commission. It has been licensed to do or transact
insurance business by virtue of the certificate of authority 23 issued by the same agency. However, a
Certification from the Commission states that Pioneer does not have a separate license to be an
agent/broker of Steamship Mutual.24

Although Pioneer is already licensed as an insurance company, it needs a separate license to act as
insurance agent for Steamship Mutual. Section 299 of the Insurance Code clearly states:
SEC. 299 . . .

No person shall act as an insurance agent or as an insurance broker in the solicitation or

procurement of applications for insurance, or receive for services in obtaining insurance, any
commission or other compensation from any insurance company doing business in the
Philippines or any agent thereof, without first procuring a license so to act from the
Commissioner, which must be renewed annually on the first day of January, or within six months
thereafter. . .
DISPOSITIVE PORTION: “WHEREFORE, the petition is PARTIALLY GRANTED. The Decision
dated July 30, 2002 of the Court of Appeals affirming the Decision dated May 3, 2000 of the
Insurance Commission is hereby REVERSED AND SET ASIDE. The Steamship Mutual
Underwriting Association (Bermuda) Ltd., and Pioneer Insurance and Surety Corporation are
ORDERED to obtain licenses and to secure proper authorizations to do business as insurer and
insurance agent, respectively. The petitioner’s prayer for the revocation of Pioneer’s Certificate of
Authority and removal of its directors and officers, is DENIED. Costs against respondents.”

ADDITIONAL INFORMATION:
SEC. 186. No person, partnership, or association of persons shall transact any insurance business
in the Philippines except as agent of a person or corporation authorized to do the business of
insurance in the Philippines, unless possessed of the capital and assets required of an insurance
corporation doing the same kind of business in the Philippines and invested in the same manner;
nor unless the Commissioner shall have granted to him or them a certificate to the effect that he
or they have complied with all the provisions of law which an insurance corporation doing
business in the Philippines is required to observe.

Every person, partnership, or association receiving any such certificate of authority shall be
subject to the insurance laws of the Philippines and to the jurisdiction and supervision of the
Commissioner in the same manner as if an insurance corporation authorized by the laws of the
Philippines to engage in the business of insurance specified in the certificate.
SEC. 187. No Insurance Company shall transact any insurance business in the Philippines until
after it shall have obtained a certificate of authority for that purpose from the Commissioner upon
application therefor and payment by the company concerned of the fees hereinafter prescribed.
...

SEC. 299. No insurance company doing business in the Philippines, nor any agent thereof, shall
pay any commission or other compensation to any person for services in obtaining insurance,
unless such person shall have first procured from the Commissioner a license to act as an
insurance agent of such company or as an insurance broker as hereinafter provided.

No person shall act as an insurance agent or as an insurance broker in the solicitation or

procurement of applications for insurance, or receive for services in obtaining insurance, any
commission or other compensation from any insurance company doing business in the
Philippines or any agent thereof, without first procuring a license so to act from the
Commissioner, . . .

SEC. 300. Any person who for compensation solicits or obtains insurance on behalf of any
insurance company or transmits for a person other than himself an application for a policy or
contract of insurance to or from such company or offers or assumes to act in the negotiating of
such insurance shall be an insurance agent within the intent of this section and shall thereby
become liable to all the duties, requirements, liabilities and penalties to which an insurance agent
is subject.
SEC. 301. Any person who for any compensation, commission or other thing of value acts or aids
in any manner in soliciting, negotiating or procuring the making of any insurance contract or in
placing risk or taking out insurance, on behalf of an insured other than himself, shall be an
insurance broker within the intent of this Code, and shall thereby become liable to all the duties,
requirements, liabilities and penalties to which an insurance broker is subject.

SEC. 99. Marine insurance includes:

(1) Insurance against loss of or damage to:
(a) Vessels, craft, aircraft, vehicles, goods, freights, cargoes, merchandise, effects, disbursements,
profits, moneys, securities, choses in action, evidences of debt, valuable papers, bottomry, and
respondentia interests and all other kinds of property and interests therein, in respect to,
appertaining to or in connection with any and all risks or perils of navigation, transit or
transportation, or while being assembled, packed, crated, baled, compressed or similarly prepared
for shipment or while awaiting shipment, or during any delays, storage, trasshipment, or
reshipment incident thereto, including war risks, marine builder’s risks, and all personal property
floater risks.
(b) Person or property in connection with or appertaining to a marine, inland marine, transit or
transportation insurance, including liability for loss of or damage arising out of or in connection
with the construction, repair, operation, maintenance or use of the subject matter of such
insurance (but not including life insurance or surety bonds nor insurance against loss by reason of
bodily injury to any person arising out of the ownership, maintenance, or use of automobiles).
(c) Precious stones, jewels, jewelry, precious metals, whether in course of transportation or
otherwise.
(d) Bridges, tunnels and other instrumentalities of transportation and communication (excluding
buildings, their furniture and furnishings, fixed contents and supplies held in storage); piers,
wharves, docks and slips, and other aids to navigation and transportation, including dry docks
and marine railways, dams and appurtenant facilities for the control of waterways.
(2) "Marine protection and indemnity insurance," meaning insurance against, or against legal
liability of the insured for loss, damage, or expense incident to ownership, operation, chartering,
maintenance, use, repair, or construction of any vessel, craft or instrumentality in use in ocean or
inland waterways, including liability of the insured for personal injury, illness or death or for loss
of or damage to the property of another person.
Eternal Gardens Memorial Park Corporation vs. Phil. American Life Insurance Co., GR No. 166245,
09 April 2008
 Construction in favor of the insured
 Contract of Adhesion

G.R. No. 166245             April 9, 2008

ETERNAL GARDENS MEMORIAL PARK CORPORATION, petitioner, vs. THE PHILIPPINE
AMERICAN LIFE INSURANCE COMPANY, respondent.

VELASCO, JR., J.

FACTS: The instant case is a Petition for Review on Certiorari under Rule 45 seeking to reverse
and set aside the CA Decision which reversed that of the RTC.

On December 10, 1980, respondent Philippine American Life Insurance Company (Philamlife)
entered into an agreement denominated as Creditor Group Life Policy No. P-19202 with petitioner
Eternal Gardens Memorial Park Corporation (Eternal). Under the policy, the clients of Eternal
who purchased burial lots from it on installment basis would be insured by Philamlife. The
amount of insurance coverage depended upon the existing balance of the purchased burial lots.
The policy was to be effective for a period of one year, renewable on a yearly basis.

The policy included a provision which expressly provided that there shall be no insurance if the
application of the Lot Purchaser is not approved by the company.

Eternal was required under the policy to submit to Philamlife a list of all new lot purchasers,
together with a copy of the application of each purchaser, and the amounts of the respective
unpaid balances of all insured lot purchasers. In relation to the instant petition, Eternal complied
by submitting a letter dated December 29, 1982, 4 containing a list of insurable balances of its lot
buyers for October 1982. One of those included in the list as "new business" was a certain John
Chuang. His balance of payments was PhP 100,000. On August 2, 1984, Chuang died.

Eternal sent a letter dated August 20, 1984 5 to Philamlife, which served as an insurance claim for
Chuang’s death. Attached to the claim were the following documents: (1) Chuang’s Certificate of
Death; (2) Identification Certificate stating that Chuang is a naturalized Filipino Citizen; (3)
Certificate of Claimant; (4) Certificate of Attending Physician; and (5) Assured’s Certificate.
In reply, Philamlife wrote Eternal a letter on November 12, 1984, 6 requiring Eternal to submit the
following documents relative to its insurance claim for Chuang’s death: (1) Certificate of Claimant
(with form attached); (2) Assured’s Certificate (with form attached); (3) Application for Insurance
accomplished and signed by the insured, Chuang, while still living; and (4) Statement of Account
showing the unpaid balance of Chuang before his death. Eternal transmitted the required
documents through a letter dated November 14, 1984, 7 which was received by Philamlife on
November 15, 1984.
After more than a year, Philamlife had not furnished Eternal with any reply to the latter’s
insurance claim. This prompted Eternal to demand from Philamlife the payment of the claim for
PhP 100,000 on April 25, 1986. In response to Eternal’s demand, Philamlife denied Eternal’s
insurance claim in a letter dated May 20, 1986, the pertinent portion of which reads: “ Since no
application had been submitted by the Insured/Assured, prior to his death, for our approval but was
submitted instead on November 15, 1984, after his death, Mr. John Uy Chuang was not covered under
the Policy.”

The RTC found that Eternal submitted Chuang’s application for insurance which he accomplished
before his death, as testified to by Eternal’s witness and evidenced by the letter dated December
29, 1982, stating, among others: "Encl: Phil-Am Life Insurance Application Forms & Cert." 10 It
further ruled that due to Philamlife’s inaction from the submission of the requirements of the
group insurance on December 29, 1982 to Chuang’s death on August 2, 1984, as well as
Philamlife’s acceptance of the premiums during the same period, Philamlife was deemed to have
approved Chuang’s application. The RTC said that since the contract is a group life insurance,
once proof of death is submitted, payment must follow.

Eternal claims that the evidence that it presented before the trial court supports its contention
that it submitted a copy of the insurance application of Chuang before his death. In Eternal’s
letter dated December 29, 1982, a list of insurable interests of buyers for October 1982 was
attached, including Chuang in the list of new businesses. Eternal added it was noted at the
bottom of said letter that the corresponding "Phil-Am Life Insurance Application Forms & Cert."
were enclosed in the letter that was apparently received by Philamlife on January 15, 1983. Finally,
Eternal alleged that it provided a copy of the insurance application which was signed by Chuang
himself and executed before his death. On the other hand, Philamlife claims that the evidence
presented by Eternal is insufficient, arguing that Eternal must present evidence showing that
Philamlife received a copy of Chuang’s insurance application.

ISSUE/S: Whether the inaction of the insurer on the insurance application be considered as
approval of the application. (YES)

RULING: The fact of the matter is, the letter dated December 29, 1982, which Philamlife stamped
as received, states that the insurance forms for the attached list of burial lot buyers were attached
to the letter. Such stamp of receipt has the effect of acknowledging receipt of the letter together
with the attachments. Such receipt is an admission by Philamlife against its own interest. 13 The
burden of evidence has shifted to Philamlife, which must prove that the letter did not contain
Chuang’s insurance application. However, Philamlife failed to do so; thus, Philamlife is deemed to
have received Chuang’s insurance application.

To reiterate, it was Philamlife’s bounden duty to make sure that before a transmittal letter is
stamped as received, the contents of the letter are correct and accounted for.

Philamlife’s allegation that Eternal’s witnesses ran out of credibility and reliability due to
inconsistencies is groundless. The trial court is in the best position to determine the reliability
and credibility of the witnesses, because it has the opportunity to observe firsthand the witnesses’
demeanor, conduct, and attitude. Findings of the trial court on such matters are binding and
conclusive on the appellate court, unless some facts or circumstances of weight and substance
have been overlooked, misapprehended, or misinterpreted, 14 that, if considered, might affect the
result of the case.

In the present case, the number of copies of the insurance application that Chuang executed is
not at issue, neither is whether the insurance application presented by Eternal has been falsified.
Thus, the inconsistencies pointed out by Philamlife are minor and do not affect the credibility of
Eternal’s witnesses. However, the question arises as to whether Philamlife assumed the risk of loss
without approving the application. This question must be answered in the affirmative.

CONTRACT OF ADHESION - As earlier stated, Philamlife and Eternal entered into an agreement
denominated as Creditor Group Life Policy No. P-1920 dated December 10, 1980. In the policy, it is
provided that:

EFFECTIVE DATE OF BENEFIT.

The insurance of any eligible Lot Purchaser shall be effective on the date he contracts a loan with
the Assured. However, there shall be no insurance if the application of the Lot Purchaser is not
approved by the Company.

An examination of the above provision would show ambiguity between its two sentences. The
first sentence appears to state that the insurance coverage of the clients of Eternal already became
effective upon contracting a loan with Eternal while the second sentence appears to require
Philamlife to approve the insurance contract before the same can become effective.

It must be remembered that an insurance contract is a contract of adhesion which must be

construed liberally in favor of the insured and strictly against the insurer in order to safeguard the
latter’s interest. Thus, in Malayan Insurance Corporation v. Court of Appeals, this Court held that:

Indemnity and liability insurance policies are construed in accordance with the general rule of
resolving any ambiguity therein in favor of the insured, where the contract or policy is prepared by
the insurer.  A contract of insurance, being a contract of adhesion, par excellence, any
ambiguity therein should be resolved against the insurer; in other words, it should be
construed liberally in favor of the insured and strictly against the insurer. Limitations of liability
should be regarded with extreme jealousy and must be construed in such a way as to preclude the
insurer from noncompliance with its obligations.

In the more recent case of Philamcare Health Systems, Inc. v. Court of Appeals, we reiterated the
above ruling, stating that:

When the terms of insurance contract contain limitations on liability, courts should construe them
in such a way as to preclude the insurer from non-compliance with his obligation. Being a contract
of adhesion, the terms of an insurance contract are to be construed strictly against the party which
prepared the contract, the insurer. By reason of the exclusive control of the insurance company over
the terms and phraseology of the insurance contract, ambiguity must be strictly interpreted against
the insurer and liberally in favor of the insured, especially to avoid forfeiture.

Clearly, the vague contractual provision, in Creditor Group Life Policy No. P-1920 dated December
10, 1980, must be construed in favor of the insured and in favor of the effectivity of the insurance
contract.

On the other hand, the seemingly conflicting provisions must be harmonized to mean that upon a
party’s purchase of a memorial lot on installment from Eternal, an insurance contract covering
the lot purchaser is created and the same is effective, valid, and binding until terminated by
Philamlife by disapproving the insurance application. The second sentence of Creditor Group Life
Policy No. P-1920 on the Effective Date of Benefit is in the nature of a resolutory condition which
would lead to the cessation of the insurance contract. Moreover, the mere inaction of the insurer
on the insurance application must not work to prejudice the insured; it cannot be interpreted as a
termination of the insurance contract. The termination of the insurance contract by the insurer
must be explicit and unambiguous.

As a final note, to characterize the insurer and the insured as contracting parties on equal footing
is inaccurate at best. Insurance contracts are wholly prepared by the insurer with vast amounts of
experience in the industry purposefully used to its advantage. More often than not, insurance
contracts are contracts of adhesion containing technical terms and conditions of the industry,
confusing if at all understandable to laypersons, that are imposed on those who wish to avail of
insurance. As such, insurance contracts are imbued with public interest that must be considered
whenever the rights and obligations of the insurer and the insured are to be delineated. Hence, in
order to protect the interest of insurance applicants, insurance companies must be obligated to
act with haste upon insurance applications, to either deny or approve the same, or otherwise be
bound to honor the application as a valid, binding, and effective insurance contract. 21

DISPOSITIVE PORTION: “WHEREFORE, we GRANT the petition. The November 26, 2004 CA

Decision in CA-G.R. CV No. 57810 is REVERSED and SET ASIDE. The May 29, 1996 Decision of
the Makati City RTC, Branch 138 is MODIFIED. Philamlife is hereby ORDERED:
(1) To pay Eternal the amount of PhP 100,000 representing the proceeds of the Life Insurance
Policy of Chuang;
(2) To pay Eternal legal interest at the rate of six percent (6%) per annum of PhP 100,000 from the
time of extra-judicial demand by Eternal until Philamlife’s receipt of the May 29, 1996 RTC
Decision on June 17, 1996;
(3) To pay Eternal legal interest at the rate of twelve percent (12%) per annum of PhP 100,000
from June 17, 1996 until full payment of this award; and
(4) To pay Eternal attorney’s fees in the amount of PhP 10,000.
No costs.”
Travellers Insurance & Surety Corporation v. Hon. Court of Appeals, G.R. No. 82036, May 22, 1997
 Right of Third Party to Sue Insurer

G.R. No. 82036. May 22, 1997.

TRAVELLERS INSURANCE & SURETY CORPORATION, Petitioner, v. HON. COURT OF
APPEALS and VICENTE MENDOZA, Respondents.

Espinas & Associates Law Office for Petitioner.

Carlos A. Tria for Private Respondent.

HERMOSISIMA, JR., J.

FACTS: The instant petition seeks the review and reversal of the decision of respondent CA
affirming in toto the RTC judgment in an action for damages filed by private respondent Vicente
Mendoza, Jr. as heir of his mother who was killed in a vehicular accident.

The complainant lumped the erring taxicab driver, the owner of the taxicab, and the alleged
insurer of the vehicle which featured in the vehicular accident into one complaint. The erring
taxicab was allegedly covered by a third-party liability insurance policy issued by petitioner
Travellers Insurance & Surety Corporation.

The trial court rendered judgment in favor of private respondent and order the three to pay,
jointly and severally, the following amounts, as well as the costs of the suit, viz:
(a) The sum of P2,924.70, as actual and compensatory damages, with interest thereon at the rate
of 12% per annum from October 17, 1980, when the complaint was filed, until the said amount is
fully paid;
(b) P30,000.00 as death indemnity;
(c) P25,000.00 as moral damages;
(d) P10,000.00 as by way of corrective or exemplary damages, and
(e) Another P10,000.00 by way of attorney’s fees and other litigation expenses.

Elevating this issue to the Court, petitioner mainly contends that it did not issue an insurance
policy as compulsory insurer of the Lady Love Taxi and that, assuming arguendo that it had
indeed covered said taxicab for third-party liability insurance, private respondent failed to file a
written notice of claim with petitioner as required by Section 384 of P.D. No. 612, otherwise
known as the Insurance Code.

ISSUE/S: Whether the private respondent is entitled to insurance of the insurer. (NO)

RULING: It is significant to point out at this juncture that the right of a third person to sue the
insurer depends on whether the contract of insurance is intended to benefit third persons also or
only the insured.
" [A]" policy . . . whereby the insurer agreed to indemnify the insured ‘against all sums . . . which
the Insured shall become legally liable to pay in respect of: (a) death of or bodily injury to any
person . . . is one for indemnity against liability; from the fact then that the insured is liable to the
third person, such third person is entitled to sue the insurer.

The right of the person injured to sue the insurer of the party at fault (insured), depends on
whether the contract of insurance is intended to benefit third persons also or on the insured. And
the test applied has been this: Where the contract provides for indemnity against liability to third
persons, then third persons to whom the insured is liable can sue the insurer. Where the contract
is for indemnity against actual loss or payment, then third persons cannot proceed against the
insurer, the contract being solely to reimburse the insured for liability actually discharged by him
thru payment to third persons, said third persons’ recourse being thus limited to the insured
alone."

Since private respondent failed to attach a copy of the insurance contract to his complaint, the
trial court could not have been able to apprise itself of the real nature and pecuniary limits of
petitioner’s liability. More importantly, the trial court could not have possibly ascertained the
right of private respondent as third person to sue petitioner as insurer of the Lady Love taxicab
because the trial court never saw nor read the insurance contract and learned of its terms and
conditions.

Petitioner, understandably, did not volunteer to present any insurance contract covering the Lady
Love taxicab that fatally hit private respondent’s mother, considering that petitioner precisely
presented the defense of lack of insurance coverage before the trial court. Neither did the trial
court issue a subpoena duces tecum to have the insurance contract produced before it under pain
of contempt. We thus find hardly a basis in the records for the trial court to have validly found
petitioner liable jointly and severally with the owner and the driver of the Lady Love taxicab, for
damages accruing to private Respondent.

"While it is true that where the insurance contract provides for indemnity against liability to third
persons, such third persons can directly sue the insurer, however, the direct liability of the insurer
under indemnity contracts against third-party liability does not mean that the insurer can be held
solidarily liable with the insured and/or the other parties found at fault. The liability of the insurer is
based on contract; that of the insured is based on tort."

Applying this principle underlying solidary obligation and insurance contracts, we ruled in one
case that:
“In solidary obligation, the creditor may enforce the entire obligation against one of the solidary
debtors. On the other hand, insurance is defined as ‘a contract whereby one undertakes for a
consideration to indemnify another against loss, damage or liability arising from an unknown or
contingent event.”

At the time of the vehicular incident which resulted in the death of private respondent’s mother,
during which time the Insurance Code had not yet been amended by Batas Pambansa (B.P.) Blg.
874, Section 384 provided as follows:

"Any person having any claim upon the policy issued pursuant to this chapter shall, without any
unnecessary delay, present to the insurance company concerned a written notice of claim setting
forth the amount of his loss, and/or the nature, extent and duration of the injuries, sustained as
certified by a duly licensed physician. Notice of claim must be filed within six months from date of
the accident, otherwise, the claim shall be deemed waived. Action or suit for recovery of damage
due to loss or injury must be brought in proper cases, with the Commission or the Courts within
one year from date of accident, otherwise the claimant’s right of action shall prescribe"
In the landmark case of Summit Guaranty and Insurance Co., Inc. v. De Guzman, 13 we ruled that
the one year prescription period to bring suit in court against the insurer should be counted from
the time that the insurer rejects the written claim filed therewith by the insured, the beneficiary
or the third person interested under the insurance policy. We explained:

"It is very obvious that petitioner company is trying to use Section 384 of the Insurance Code as a
cloak to hide itself from its liabilities. The facts of these cases evidently reflect the deliberate
efforts of petitioner company to prevent the filing of a formal action against it. Bearing in mind
that if it succeeds in doing so until one year lapses from the date of the accident it could set up
the defense of prescription, petitioner company made private respondents believe that their
claims would be settled in order that the latter will not find it necessary to immediately bring suit.
In violation of its duties to adopt and implement reasonable standards for the prompt
investigation of claims and to effectuate prompt, fair and equitable settlement of claims, and with
manifest bad faith, petitioner company devised means and ways of stalling the settlement
proceedings. . . . [No] steps were taken to process the claim and no rejection of said claim was
ever made even if private respondent had already complied with all the requirements. . . .

This Court has made the observation that some insurance companies have been inventing excuses
to avoid their just obligations and it is only the State that can give the protection which the
insuring public needs from possible abuses of the insurers." 14

It is significant to note that the aforecited Section 384 was amended by B.P. Blg. 874 to
categorically provide that "action or suit for recovery of damage due to loss or injury must be
brought in proper cases, with the Commissioner or the Courts within one year from denial of the
claim, otherwise the claimant’s right of action shall prescribe"

We have certainly ruled with consistency that the prescriptive period to bring suit in court under
an insurance policy, begins to run from the date of the insurer’s rejection of the claim filed by the
insured, the beneficiary or any person claiming under an insurance contract. This ruling is
premised upon the compliance by the persons suing under an insurance contract, with the
indispensable requirement of having filed the written claim mandated by Section 384 of the
Insurance Code before and after its amendment. Absent such written claim filed by the person
suing under an insurance contract, no cause of action accrues under such insurance contract,
considering that it is the rejection of that claim that triggers the running of the one-year
prescriptive period to bring suit in court, and there can be no opportunity for the insurer to even
reject a claim if none has been filed in the first place, as in the instant case.

"The one-year period should instead be counted from the date of rejection by the insurer as this is
the time when the cause of action accrues. . .

In Eagle Star Insurance Co., Ltd., Et. Al. v. Chia Yu, this Court ruled:

‘The plaintiff’s cause of action did not accrue until his claim was finally rejected by the insurance
company. This is because, before such final rejection, there was no real necessity for bringing
suit.’

The philosophy of the above pronouncement was pointed out in the case of ACCFA v. Alpha
Insurance and Surety Co., viz.:

‘Since a cause of action requires, as essential elements, not only a legal right of the plaintiff and a
correlative obligation of the defendant but also an act or omission of the defendant in violation of
said legal right, the cause of action does not accrue until the party obligated refuses, expressly or
impliedly, to comply with its duty’." 16

When petitioner asseverates, thus, that no written claim was filed by private respondent and
rejected by petitioner, and private respondent does not dispute such asseveration through a
denial in his pleadings, we are constrained to rule that respondent appellate court committed
reversible error in finding petitioner liable under an insurance contract the existence of which had
not at all been proven in court. Even if there were such a contract, private respondent’s cause of
action can not prevail because he failed to file the written claim mandated by Section 384 of the
Insurance Code. He is deemed, under this legal provision, to have waived his rights as against
petitioner-insurer.

DISPOSITIVE PORTION: “WHEREFORE, the instant petition is HEREBY GRANTED. The

decision of the Court of Appeals in CA-G.R. CV No. 09416 and the decision of the Regional Trial
Court in Civil Case No. 135486 are REVERSED and SET ASIDE insofar as Travellers Insurance &
Surety Corporation was found jointly and severally liable to pay actual, moral and exemplary
damages, death indemnity, attorney’s fees and litigation expenses in Civil Case No. 135486. The
complaint against Travellers Insurance & Surety Corporation in said case is hereby ordered
dismissed.”

ADDITIONAL INFORMATION: 1. COMMERCIAL LAW; INSURANCE; CONTRACT OR POLICY;

NECESSITY OF AFFIXING A COPY THEREOF TO COMPLAINT; CASE AT BENCH. — When
private respondent filed his amended complaint to implead petitioner as party defendant and
therein alleged that petitioner was the third-party liability insurer of the Lady Love taxicab that
fatally hit private respondent’s mother, private respondent did not attach a copy of the insurance
contract to the amended complaint. Private respondent does not deny this omission. It is
significant to point out at this juncture that the right of a third person to sue the insurer depends
on whether the contract of insurance is intended to benefit third persons also or only the insured.
. . Since private respondent failed to attach a copy of the insurance contract to his complaint, the
trial court could not have been able to apprise itself of the real nature and pecuniary limits of
petitioner’s liability. More importantly, the trial court could not have possibly ascertained the
right of private respondent as third person to sue petitioner as insurer of the Lady Love taxicab
because the trial court never saw nor read the insurance contract and learned of its terms and
conditions. Petitioner, understandably, did not volunteer to present any insurance contract
covering the Lady Love taxicab that fatally hit private respondent’s mother, considering that
petitioner precisely presented the defense of lack of insurance coverage before the trial court.
Neither did the trial court issue a subpoena duces tecum to have the insurance contract produced
before it under pain of contempt. We thus find hardly a basis in the records for the trial court to
have validly found petitioner liable jointly and severally with the owner and the driver of the Lady
Love taxicab, for damages accruing to private Respondent.

2. ID.; ID.; ID.; LIABILITY BASED ON CONTRACT DISTINGUISHED FROM LIABILITY BASED
ON TORTS AND QUASI-DELICTS; CASE AT BAR. — Apparently, the trial court did not
distinguish between the private respondent’s cause of action against the owner and the driver of
the Lady Love taxicab and his cause of action against petitioner. The former is based on torts and
quasi-delicts while the latter is based on contract. Confusing these two sources of obligations as
they arise from the same act of the taxicab fatally hitting private respondent’s mother, and in the
face of overwhelming evidence of the reckless imprudence of the driver of the Lady Love taxicab,
the trial court brushed aside its ignorance of the terms and conditions of the insurance contract
and forthwith found all three — the driver of the taxicab, the owner of the taxicab, and the
alleged insurer of the taxicab — jointly and severally liable for actual, moral and exemplary
damages as well as attorney’s fees and litigation expenses. This is clearly a misapplication of the
law by the trial court and respondent appellate court grievously erred in not having reversed the
trial court on this ground.

3. ID.; ID.; ID.; INSURER’S LIABILITY BASED THEREON LIMITED TO P50,000.00 IN CASE AT
BAR. — Assuming arguendo that petitioner is the insurer of the Lady Love taxicab in question, its
liability is limited to only P50,000.00, this being its standard amount of coverage in vehicle
insurance policies. It bears repeating that no copy of the insurance contract was ever proffered
before the trial court by the private respondent, notwithstanding knowledge of the fact that the
latter’s complaint against petitioner is one under a written contract. Thus, the trial court
proceeded to hold petitioner liable for an award of damages exceeding its limited liability of
P50,000.00. This only shows beyond doubt that the trial court was under the erroneous
presumption that petitioner could be found liable absent proof of contract and based merely on
the proof of reckless imprudence on the part of the driver of the Lady Love taxicab that fatally hit
private respondent’s mother.

4. ID.; ID.; NOTICE OF CLAIM; AN INDISPENSABLE PRE-REQUISITE TO SUE UNDER AN

INSURANCE CONTRACT; REASONS; CASE AT BENCH. — Petitioner did not tire in arguing
before the trial court and the respondent appellate court that, assuming arguendo that it had
issued the insurance contract over the Lady Love taxicab, private respondent’s cause of action
against petitioner did not successfully accrue because he failed to file with petitioner a written
notice of claim within six (6) months from the date of the accident as required by Section 384 of
the Insurance Code. . . We have certainly ruled with consistence, that the prescriptive period to
bring suit in court under an insurance policy, begins to run front the date of the insurer’s
rejection of the claim filed by the insured, the beneficiary or any person claiming under an
insurance contract. This ruling is premised upon the compliance by the persons suing under an
insurance contract, with the indispensable requirement of having filed the written claim
mandated by Section 384 of the Insurance Code before and after its amendment. Absent such
written claim filed by the person suing under an insurance contract, no cause of action accrues
under such insurance contract, considering that it is the rejection of that claim that triggers the
running of the one-year prescriptive period to bring suit in court, and there can be no opportunity
for the insurer to even reject a claim if none has been filed in the first place, as in the instant case.
Gulf Resorts, Inc. v. Philippine Charter Insurance Corp.. G.R. No. 156167, May 16, 2005
 Fine Print or Contract of Adhesion Rule

G.R. No. 156167             May 16, 2005

GULF RESORTS, INC., petitioner, vs. PHILIPPINE CHARTER INSURANCE
CORPORATION, respondent.

PUNO, J.

FACTS: This is a petition for certiorari  under Rule 45 of the Revised Rules of Court by petitioner
GULF RESORTS, INC., against respondent PHILIPPINE CHARTER INSURANCE CORPORATION.
Petitioner assails the appellate court decision 1 which dismissed its two appeals and affirmed the
judgment of the trial court.

For review are the warring interpretations of petitioner and respondent on the scope of the
insurance company’s liability for earthquake damage to petitioner’s properties. Petitioner avers
that, pursuant to its earthquake shock endorsement rider, Insurance Policy No. 31944 covers all
damages to the properties within its resort caused by earthquake. Respondent contends that the
rider limits its liability for loss to the two swimming pools of petitioner.

Plaintiff is the owner of the Plaza Resort situated at Agoo, La Union and had its properties in said
resort insured originally with the American Home Assurance Company (AHAC-AIU). In the first
four insurance policies issued by AHAC-AIU from 1984-85; 1985-86; 1986-1987; and 1987-88 (Exhs.
"C", "D", "E" and "F"; also Exhs. "1", "2", "3" and "4" respectively), the risk of loss from earthquake
shock was extended only to plaintiff’s two swimming pools, thus, "earthquake shock endt." (Item
5 only) (Exhs. "C-1"; "D-1," and "E" and two (2) swimming pools only (Exhs. "C-1"; ‘D-1", "E" and "F-
1"). "Item 5" in those policies referred to the two (2) swimming pools only (Exhs. "1-B", "2-B", "3-B"
and "F-2"); that subsequently AHAC(AIU) issued in plaintiff’s favor Policy No. 206-4182383-0
covering the period March 14, 1988 to March 14, 1989 (Exhs. "G" also "G-1") and in said policy the
earthquake endorsement clause as indicated in Exhibits "C-1", "D-1", Exhibits "E" and "F-1" was
deleted and the entry under Endorsements/Warranties at the time of issue read that plaintiff
renewed its policy with AHAC (AIU) for the period of March 14, 1989 to March 14, 1990 under
Policy No. 206-4568061-9 (Exh. "H") which carried the entry under "Endorsement/Warranties at
Time of Issue", which read "Endorsement to Include Earthquake Shock (Exh. "6-B-1") in the
amount of P10,700.00 and paid P42,658.14 (Exhs. "6-A" and "6-B") as premium thereof.

On July 16, 1990 an earthquake struck Central Luzon and Northern Luzon and plaintiff’s
properties covered by Policy No. 31944 issued by defendant, including the two swimming pools in
its Agoo Playa Resort were damaged

After the earthquake, petitioner advised respondent that it would be making a claim under its
Insurance Policy No. 31944 for damages on its properties. Respondent instructed petitioner to file
a formal claim, then assigned the investigation of the claim to an independent claims adjuster,
Bayne Adjusters and Surveyors, Inc.3 On July 30, 1990, respondent, through its adjuster, requested
petitioner to submit various documents in support of its claim. On August 7, 1990, Bayne
Adjusters and Surveyors, Inc., through its Vice-President A.R. de Leon, 4 rendered a preliminary
report5 finding extensive damage caused by the earthquake to the clubhouse and to the two
swimming pools. Mr. de Leon stated that "except for the swimming pools, all affected items have
no coverage for earthquake shocks."6 On August 11, 1990, petitioner filed its formal demand7 for
settlement of the damage to all its properties in the Agoo Playa Resort. On August 23, 1990,
respondent denied petitioner’s claim on the ground that its insurance policy only afforded
earthquake shock coverage to the two swimming pools of the resort. 8 Petitioner and respondent
failed to arrive at a settlement.

ISSUE/S: Whether the CA correctly held that under respondent’s insurance policy no. 31944, only
the two (2) swimming pools, rather than all the properties covered thereunder, are insured
against the risk of earthquake shock. (YES)

RULING: Four key items were taken note by the Court in the resolution of the case at bar, as
follows: (1) designation of location of risk; (2) breakdown for premium payments; (3) Policy
condition No. 6 which states that the insurance does not cover any loss or damage occasioned by
or through or in consequence, directly or indirectly of any of the following occurrences, namely:--
(a) Earthquake, volcanic eruption or other convulsion of nature; and (4) the rider policy  titled
"Extended Coverage Endorsement (To Include the Perils of Explosion, Aircraft, Vehicle and
Smoke)," stated, viz: x x x Provided always that all the conditions of this Policy shall apply (except
in so far as they may be hereby expressly varied) and that any reference therein to loss or damage by
fire should be deemed to apply also to loss or damage occasioned by or through or in consequence of
Earthquake.

It is basic that all the provisions of the insurance policy should be examined and interpreted in
consonance with each other.25 All its parts are reflective of the true intent of the parties. The
policy cannot be construed piecemeal. Certain stipulations cannot be segregated and then made
to control; neither do particular words or phrases necessarily determine its character. Petitioner
cannot focus on the earthquake shock endorsement to the exclusion of the other provisions. All
the provisions and riders, taken and interpreted together, indubitably show the intention of the
parties to extend earthquake shock coverage to the two swimming pools only.

A careful examination of the premium recapitulation will show that it is the clear intent of the
parties to extend earthquake shock coverage only to the two swimming pools. Section 2(1) of the
Insurance Code defines a contract of insurance as an agreement whereby one undertakes for a
consideration to indemnify another against loss, damage or liability arising from an unknown or
contingent event. Thus, an insurance contract exists where the following elements concur:

1. The insured has an insurable interest;

2. The insured is subject to a risk of loss by the happening of the designated peril;

3. The insurer assumes the risk;

4. Such assumption of risk is part of a general scheme to distribute actual losses among a large
group of persons bearing a similar risk; and

5. In consideration of the insurer's promise, the insured pays a premium.26 (Emphasis ours)

An insurance premium is the consideration paid an insurer for undertaking to indemnify the
insured against a specified peril. 27 In fire, casualty, and marine insurance, the premium payable
becomes a debt as soon as the risk attaches. 28 In the subject policy, no premium payments were
made with regard to earthquake shock coverage, except on the two swimming pools. There is no
mention of any premium payable for the other resort properties with regard to earthquake shock. 

In sum, there is no ambiguity in the terms of the contract and its riders. Petitioner cannot rely on
the general rule that insurance contracts are contracts of adhesion which should be liberally
construed in favor of the insured and strictly against the insurer company which usually prepares
it.31 A contract of adhesion is one wherein a party, usually a corporation, prepares the stipulations
in the contract, while the other party merely affixes his signature or his "adhesion" thereto.
Through the years, the courts have held that in these type of contracts, the parties do not bargain
on equal footing, the weaker party's participation being reduced to the alternative to take it or
leave it. Thus, these contracts are viewed as traps for the weaker party whom the courts of justice
must protect.32 Consequently, any ambiguity therein is resolved against the insurer, or construed
liberally in favor of the insured.33

The case law will show that this Court will only rule out blind adherence to terms where facts and
circumstances will show that they are basically one-sided. 34 Thus, we have called on lower courts
to remain careful in scrutinizing the factual circumstances behind each case to determine the
efficacy of the claims of contending parties. In Development Bank of the Philippines v.
National Merchandising Corporation, et al.,35 the parties, who were acute businessmen of
experience, were presumed to have assented to the assailed documents with full knowledge.

We cannot apply the general rule on contracts of adhesion to the case at bar. Petitioner cannot
claim it did not know the provisions of the policy. From the inception of the policy, petitioner had
required the respondent to copy verbatim the provisions and terms of its latest insurance policy
from AHAC-AIU. The testimony of Mr. Leopoldo Mantohac, a direct participant in securing the
insurance policy of petitioner, is reflective of petitioner’s knowledge.

Respondent, in compliance with the condition set by the petitioner, copied AIU Policy No. 206-
4568061-9 in drafting its Insurance Policy No. 31944. It is true that there was variance in some
terms, specifically in the replacement cost endorsement, but the principal provisions of the policy
remained essentially similar to AHAC-AIU’s policy. Consequently, we cannot apply the "fine
print" or "contract of adhesion" rule in this case as the parties’ intent to limit the coverage of the
policy to the two swimming pools only is not ambiguous.

DISPOSITIVE PORTION: IN VIEW WHEREOF, the judgment of the Court of Appeals is affirmed.
The petition for certiorari is dismissed. No costs.
A contract of insurance is an agreement whereby one undertakes for a consideration to indemnify
another against loss, damage or liability arising from an unknown or contingent event.

Any contingent or unknown event, whether past or future, which may damnify a person having
an insurable interest, or create a liability against him, may be insured against, subject to the
provisions of the Insurance Code.

An insurance for or against the drawing of any lottery or for or against any chance or ticket in a
lottery drawing a prize may not be insured, because gambling results in profit and insurance only
seeks to indemnify the insured against loss.

The test or measure is whether one will derive pecuniary benefit or advantage from its
preservation or will suffer pecuniary loss or damage from its destruction.

PARTIES: The following are the parties in an insurance contract:

(1) INSURER – Every person, partnership, association or corporation duly authorized to transact
insurance business as provided in the Code may be an insurer. H is the party who agrees to
indemnify another upon the happening of specified contingency.
(2) INSURED – Party to be indemnified in case of a loss. Anyone except a public enemy (is a
nation at war with the Philippines and every citizen or subject of such nation) may be insured.
The purpose of war is to cripple the power and exhaust the resources of the enemy, and it is
inconsistent to destroy its resources then pay it the value of what has been destroyed.
(3) BENEFICIARY – the person who receives the benefits of an insurance policy upon its maturity.

The written instrument in which a contract of insurance is set forth, is called a policy of
insurance. It shall be in printed form which may contain blank spaces; and any word, phrase,
clause, mark, sign, symbol, signature, number, or word necessary to complete the contract of
insurance shall be written on the blank spaces provided therein.

A policy of insurance must specify:

(1) The parties between whom the contract is made;

(2) The amount to be insured except in the cases of open or running policies;
(3) The premium, or if the insurance is of a character where the exact premium is only
determinable upon the termination of the contract, a statement of the basis and rates upon which
the final premium is to be determined;
(4) The property or life insured;
(5) The interest of the insured in property insured, if he is not the absolute owner thereof;
(6) The risks insured against; and
(7) The period during which the insurance is to continue.
I. Introduction
A. Laws governing insurance
The following are the laws which govern contracts of insurance in the Philippines, to wit:

(1) Republic Act No. 10607, otherwise known as “The Insurance Code”
(2) Republic Act No. 386, otherwise known as the Civil Code of the Philippines, in the absence of
applicable provisions in the Insurance Code
(3) General principles about insurance, in the absence of applicable provisions in the Insurance
Code and the Civil Code

Since the year 1917, the Philippine law on Insurance was found in Act No. 2427, as amended, and
the Civil Code.2 Act No. 2427 was largely copied from the Civil Code of California.

After perusing the Insurance Act, we are firmly persuaded that the non-payment of premiums is
such a vital defense of insurance companies that since the very beginning, said Act no. 2427
expressly preserved it, by providing that after the policy shall have been in force for two years, it
shall become incontestable (i.e. the insurer shall have no defense) except for fraud, non-payment
of premiums, and military or naval service in time of war (sec. 184 [b], Insurance Act). And when
Congress recently amended this section (Rep. Act No. 171), the defense of fraud was eliminated,
while the defense of nonpayment of premiums was preserved. Thus the fundamental character of
the undertaking to pay premiums and the high importance of the defense of non-payment
thereof, was specifically recognized.

B. General concept of insurance

- Insurance is a means by which one seeks to be covered against the consequences of an event
that may cause loss or damage. The concept is that the premiums that are paid are accumulated
in a pool from which payment of claims are to be obtained. As a basis, it is assumed that the
people contributing premiums are in excess of those making claims resulting in a larger pool of
money than the amounts being claimed. Insurance is a matter of addressing risks (risks we can
live with and risks we cannot live with).

C. Characteristics
D. Elements of insurance
E. Right of subrogation (TBD)

Cases:
Constantino v. Asia Life, 87 Phil. 248
Insular Life v. Ebrado, 80 SCRA 181
White Gold Marine Services vs. Pioneer Insurance, et al. (GR No. 154514, 28 July 2005)
Eternal Gardens Memorial Park Corporation vs. Phil. American Life Insurance Co., GR No. 166245,
09 April 2008
Travellers Insurance & Surety Corporation v. Hon. Court of Appeals, G.R. No. 82036, May22, 1997
Gulf Resorts, Inc. v. Philippine Charter Insurance Corp.. G.R. No. 156167, May 16, 2005
II. Contract of Insurance
A. Requisites of a contract of insurance
In order that there will be a valid and enforceable contract of insurance, it is necessary that the
following be present:
(1)A subject matter in which the insured has an insurable interest;
(2) Event or peril insured against which may be any (future) contingent or unknown event, past or
future, and a duration for the risk thereof;
(3)A promise to pay or indemnify in a fixed or ascertainable amount;
(4) A consideration for the promise, known as the "premium"; and
(5) A meeting of minds of the parties upon all the foregoing essentials.

B. Perfection
C. Parties to a contract of insurance (Sec. 6 & 7, ICP)
D. Subject matter of insurance (Sec. 3 & 4, ICP)
E. Insurance not a wagering contract (Sec. 4, ICP)

III. Insurable Interest

A. Concept of insurable interest in general
B. Reason for the requirement of insurable interest
C. Insurable interest in life insurance (Sec. 10, ICP)
D. Insurable interest in property insurance (Sec. 13 & 14, ICP)